US Supreme Court to hear Intel retirement fund dispute
WASHINGTON: The US Supreme Court on Monday (Jun 10) agreed to hear Intel Corp’s bid to avoid a lawsuit accusing it of violating federal law in making employee retirement plan investments that cost beneficiaries hundreds of millions of dollars.
The justices will take up Intel’s appeal of a lower court ruling that revived the proposed class action lawsuit, initiated by a former employee in 2015, after a judge earlier agreed with the technology company that the litigation was filed too late.
The lawsuit accused the company committees managing the retirement contribution and 401(k) savings plans of breaching their fiduciary duty to the participants by placing an overly heavy emphasis on alternative investments such as hedge funds and private equity, in contrast to peer retirement funds.
The lawsuit was brought by former Intel engineer Christopher Sulyma in San Jose, California federal court.
The dispute centers on the time period that retirement plan participants have to file suit for alleged violations of the Employee Retirement Income Security Act (ERISA), a federal law that requires plan managers to invest prudently.
Beneficiaries generally have six years to sue over ill-advised investment decisions. But that deadline is cut to three years if a problem is known sooner.
California-based Intel said the lawsuit should be thrown out because the fund participants had “actual knowledge” of the issue more than three years before the lawsuit was filed based on emails the company had sent with links to documents about the investments. The company said in court papers the investments were chosen to better diversify the plans’ portfolios.
Sulyma said that while he was employed at Intel between 2010 and 2012 he was unaware of the alternative investments in the documents posted online, or that they carried high fees and performed poorly. He said he did not even know what hedge funds were.
A federal judge threw out the case as untimely, but the San Francisco-based 9th US Circuit Court of Appeals last year let it proceed, ruling that the three-year deadline would apply only if Sulyma knew not only that the investments had occurred but also that they had been imprudent.
Intel appealed to the Supreme Court. The company said the 9th Circuit’s decision would make it too easy for a plaintiff to sustain a lawsuit simply by asserting “that he did not read the relevant plan documents, or simply that he cannot recall whether he saw them.”
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The justices last week took up a separate retirement fund dispute involving IBM Corp, agreeing to decide whether managers of a fund that invested in the company’s stock can be sued for failing to disclose that its microelectronics business was over-valued.